PCCW saw its share price close at the highest in nearly two years on market expectations the telecommunications giant will post solid gains in its interim results announcement on Friday.

Shares of the city's biggest fixed-line network operator finished up 4.56 per cent at HK$2.75, its highest closing price since reaching HK$2.81 on September 16, 2008.

Lisa Soh, an analyst at Macquarie Equities Research, forecast PCCW to post a 25.38 per cent increase in first-half net profit to HK$820 million from HK$654 million a year ago.

'The general improvement in the economy is benefiting PCCW and its shares,' Soh said, noting that first-half earnings received a boost from the group's mobile operations and the television and content business.

'There has also been some improvement in its telecommunications services business,' she said. That segment includes local telephony, international direct dial, local and international data services and broadband.

At PCCW's annual general meeting in May, chairman Richard Li Tzar-kai declared the group was confident of a rebound in advertising spending this year.

Media-monitoring firm admanGo last month gave credence to that when it said first-half advertising spending in Hong Kong grew 23 per cent to HK$14.29 billion, from HK$11.69 billion the previous year, with the city's pay-television service providers reaping the most significant gains. It estimated advertising income for PCCW's Now TV rose 93 per cent year on year, driven by more advertising campaigns from banking giant HSBC.

Operating cost reductions may have also helped interim earnings this year, according to Soh.

She said, for example, Now TV does not bear the high cost of the English Premier League, whose broadcast rights are now with rival Cable TV.

However, Soh predicted a lower revenue contribution from Pacific Century Premium Developments compared with the first half last year. This majority-owned subsidiary of PCCW handles the group's property portfolio across Asia, including the Cyberport development in Hong Kong